Opportunities and Threats for Expansion

This assignment requires students to analyze external factors impacting a business's expansion plans. The focus is on identifying both opportunities and threats using a framework like PESTEL (Political, Economic, Social, Technological, Environmental, and Legal). The analysis should consider the viewpoints of different stakeholders involved in the expansion process.

Business Organisations and
Environments in a Global
Context

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK ..............................................................................................................................................1
About Toyota..............................................................................................................................1
Business environment in Spain...................................................................................................2
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Globalization is one of the main issue in today's world. It is termed as process used for
eliminating barriers and connect things, ideas and people in entire world. There are various
organisations which are becoming global day by day, as they wants to make growth and
globalization is considered as the major way for the rapid growth of an enterprise.
Toyota is Japanese international self-propelled manufacturer having there headquarter in
Japan (Wang, Wang and Yang, 2010). The company becomes a leader in market regarding the
gross sales of hybrid electric vehicles and is also a largest organisation which encourages hybrid
vehicle's mass market adoption around the entire globe.
This report will discuss the expansion of Toyota in the Spain. Company is having its
existence there but not on a very large scale. In this project, selected business information and
the proper discussion in regards with the allocated environment of the business will be done.
TASK
About Toyota
Kilchiro Toyoda founded this company in the year 1933. After a year i.e. in 1934
organisation make manufacturing of their first product which is known as Type A engine and in
1936 produced a passenger car AA. Apart from the auto mobiles, organisation also give financial
services via their division called Toyota Financial Services and manufacture robots also for
distinct firms (Tarique and Schuler, 2010). It is a famous and known company because of their
manufacturing in relation with high quality cars. Use of the latest hybrid technology in the cars
of Toyota helps them to have a pride and increase in sales. In the last several years, company
become number in making sale of their cars all around the world. Below diagram shows the sales
of Toyota according to the regions.
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In the year 2008, organization overtook GM and automotive firm announced that Toyota
is one of the largest manufacturer of car. But after this thing, there were lots of complaints and
many consumers started to blame regarding the control on quality due to fast expansion. This
thing arise as the main issue with the company. Because of their continuous expansion, more
than 8 million cars were recalled in 2009 due to accelerator and brake defects and bearing, and
was also facing around 97 lawsuits because of damage for death and injury linked with the
claims that the cars were having fault. The firm said that they are working regarding the
problem's solution, they also mentioned that they will test all SUV models involving Rav4, Land
Cruiser Prado and Land Cruiser (Needle, 2010). This kind of issues is going to affect the
organisation's environment in Spain.
Product of the Toyota are having a high demand all over the world and there is a time
when they had a feeling that they will be unable to meet customer's demand but there is nothing
like that as they were making normal selling and increases the manufacturing speed. Fast
expansion assist in meeting the clients demand but on other side , they also started to receive
various complaints. Spare parts which are purchased from distinct suppliers were the major issue
as well as they also lost control on quality.
Business environment in Spain
Toyota makes expansion of their business in Spain named as Toyota Espana S.L.U. This
organisation retails cars of the company. It was established in the year 1992 and is situated in
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Alcobendas, Spain. From the year 2002, September 25, Toyota Espana, S.L.U. Make operations
as subsidiary of Toyota Motor Europe. Organisation continues their operations of promoting as
well as expanding hybrid technology. They are giving away a particular new model in relation
with crossover market called Toyota C-HR, to the Goldcar, which is transport hiring company
having 30 years or more experience in industry and is currently making their operations in
around 90 tourist places internationally (Nahavandi, 2016). In this way Toyota Spain makes
expansion of hybrid technology by making supply of C-HR to the Goldcar.
In Spain the company is having around 11 % of the market share as per the statistics with
its product called Toyota Auris.
It has also been reported that, Toyota Spain sells around 64,200 cars in the year 2016,
which is termed as improvement of approx 30% from the previous year. Of the auto maker of
Japan total sales of Toyota branded vehicle were 58, 500, while the market of Spain taped entire
sales in the year 2016, a improvement of 10.9%.
In order to make successful expansion in Spain, Toyota's Lean Production System will be
very helpful. Lean production is type of model which is followed effectively by the Toyota and
assist them in maximising their conditions of working and also support in saving money as well
as time. The major aim of the system is to decrease the input of time, money, work force,
inventory and working space. These sorts of waste should be eliminated in a proper way. In
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different words, it can be said that, meaning of the lean production is to reduce wastage and
produce simple and easy steps in order to maximise results of working. Production system of
Toyota is also termed as lean manufacturing as they worked and introduced on the concept to
make saving of extra wastage. This model makes elimination of the useless transportation, waste,
motion, overproduction, inventory, defective goods, implementation and waiting of thoughts like
customer pull and continuous flow. The main areas which are taken into considerations are
delivery, safety, quality, morale and costs.
For the expansion of business in Spain, Lean manufacturing will support Toyota in
attaining several targets and benefits like saving workforce, time and money and various factors
which will indirectly strengthen organisation and assist in growing their market share. Lean
production system will also reduce waste of around 80% and reduce cost of production and
manufacturing cycle by 50%. In the country like Spain, where organisation is not having large
market share, this system will support in gaining it. System will also reduce inventory which
support company in saving area for making storage and will minimise the 505 of the workforce.
In order to expand a business in Spain, there are different kind of factors needs to be
taken into consideration. To setup a trade amid a downturn in economy is always risky. To
develop business in Spain, it is important to have a understanding of the country's business
climate in comparison to other countries of Europe. As per the report of Global Competitiveness
by World Economic Forum, Spain has taken 29th position among 134 countries for second
consecutive year (Nadkarni and Herrmann, 2010). In another report, Spain ranks 34th, i.e. 3
position down. This country is not much competitive in the market of information technology as
compared to another countries. Spain will give profit to Toyota, if they will pay attention on
creativity and innovation in the areas of environment, energy, health and mobility.
Spain's income tax
Recently, income tax is favouring both local as well as foreign companies. Organisations
who will enter new market have to pay special beneficial tax rates. As per existing legislation,
SME's and new trades having EUR 8 million profit can make application for the 25% taxation
rate up to EUR 120, 000 instead of 30%.
Spain's market size
Market size is termed as the entire amount of expected sales of a company in provided
market. Spain have 46 million people in which 12 are migrants and having stable size of market
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from last decades. This will also be helpful for Toyota to make proper expansion. However,
latest, economic recession is having an effect on local economy but all the organisations are not
hit by the such economic crisis. It involves companies, who are having good market reputation.
Availability of Spanish workforce
As per National Statistics Institute, Spain is having around 4 million unemployed
individuals. From the perspective of Toyota, it is good time have their engagement in economic
activities and start recruiting (Mellahi and Collings, 2010). There is large amount skilled workers
who wants to have job instead of low pay. As mentioned company is expanding in Spanish
market, it is very important to know about such measures.
Living cost in Spain
The living cost has maximised by 2% over the year 2009. Goods are very expensive and
the prices of petrol are also increased by 30% in 12 months or less. As per the study there is also
a increase in prices of taxi fares, water and bus around 6%. Prices of electricity are also
maximised by around 4%. However, there is not much variations in salaries of employees. Spain
has done proper maintenance in regards with salaries of public workers and many private firms
have made arrangement to minimise salaries or cut amount of workers.
Life quality in Spain
Spain is having a good rank in the most preferred location for individuals due to good
weather conditions. There is difference in views if talked by life quality in Spain. Many people
have made complaint regarding the increased price of household and daily consumption items
but on the other hand appreciate quality and speed of healthcare system. Many new individual
make complaint about easy availability of house and traffic congestion but also praise freedom
and leisure activities. Hence, the workers of Toyota who will live in Spain may have mixed life
quality.
Costs of Spanish real estate and availability
As per the ministry of housing of Spain, costs of real estate in Madrid have increased
around 200% from the year 1995 to 2007 and have since decreased by 10% as per the reports of
Idealista.com. It means that if Toyota will make expansion of their in Spain, will have accession
of wide range of purchase properties and rental regarding their office. They will also be having
more choice in relation with offices and more bargaining power. In Spain, low price of property
are there in outskirts of the city because of their distance from main city.
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Auto mobile industry in Spain
Spain is the 2nd largest manufacturer of car in Europe and 11th in all over world. There are
various multinational brands like Volkswagen, Renault, Mercedes etc. who are making their
business operation. The auto parts industry of Spain is termed as another major factor of the
success of automotive sector (Hill, Cronk and Wickramasekera, 2013). Companies like Peugot,
Nissan are already producing hybrid and electric vehicles in Spain. Auto parts company of Spain
are giving particular system and components for hybrid and electric vehicles. Before making
expansion of business by Toyota in Spain, organisation should take into consideration various
market penetration strategies, which are as follows:
 Direct contact with several prospective customers.
 Partners for doing business: organisation which are already making working in Spain and
making sale of components to the automotive manufacturing sector of Spain. This kind of
process will speed up procedure of marketing, since enterprise is already having portfolio
of client which will trust customer and open to hear new points of collaboration.
 Direct contact with firms of public service and utilities.
 Joint collaboration with organisation who wants to strategically spread portfolio and start
new line of business. Establishment of business relation with entity or enterprise
concentrated on automotive industry.
 As a part of lead generation and prescription, it will be interesting to connect with local
subordinate which make promotion of utilisation of renewable energies between
automotive sub sectors (Farndale, Scullion and Sparrow, 2010). Such subordinates will
have straightforward interaction with various manufacturers of vehicle who are there in
Spain and they may also have influence on actions of government.
If Toyota will have expansion in Spain, than they will be having several advantages:
 Spain is 2nd largest auto-mobile manufacturer in Europe and 8th in entire world.
 It is number 1 manufacturer of industrial vehicle in Europe.
 Leading brands of auto-mobile are there in Spain.
 17 plants regarding manufacturing are installed in territory of Spain.
 Around 1000 organisations are manufacturing equipments and spare parts in firm
supply chain.
 83% of produced vehicles in Spain are transported to around 100 countries.
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 Spanish territory transport 5 million vehicles every year.
The automotive sector of Spain presents 10% of GDP and 19% Spanish exports. The
sector develops 2 million indirect and 300,000 direct jobs which is linked to industry (Caligiuri,
and Tarique, 2012). Production plants in Spain are machine-controlled in Europe with around
980 robots with each of the 10,000 workers and also have high investment rate in automation and
modernization in industrial sectors. This thing will be very supportive for the growth and
development of Toyota in the market in the market of Spain. Country is having various
opportunities for growth regarding any kind of business and due to this there are several
multinational automation companies having there existence in order to make profit.
PESTEL analysis
Toyota's threats and opportunities can be identified with the support of the PESTEL
analysis, so that there will be no difficulty in making expansion in Spain. Toyota is one of the
main player in the industry of global automotive. However, there must be a exploitation of
threats and opportunities in its macro environment (Bachmann and Inkpen, 201.).
 Political factors: Toyota may get affected by the political conditions of Spain. This factor
will make identification of the government's effect on industries and firms. As per the
case of mentioned country, necessary external political factors are:
◦ Free agreements of trade (opportunity)
◦ Political stability in major markets (opportunity)
◦ Support of government for eco friendly products (opportunity)
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 Economic factors: Various trends of economy may affect organisational development of
Toyota. This factor will analyse impact of business change and economic situations.
Some of the economic factors for the organisation are:
◦ US economy's growth
◦ US Dollar vs. Weaker Yen
◦ Developing countries fast growth Social factor: Toyota may also experience the impact of socio-cultural or social factors.
This factors refers to the effect of trends of socio-cultural on business. Company is
having an opportunity to give more and more products which will satisfy increasing
interest of customer in electric and hybrid vehicles. Organisation must also consider
increase gap of wealth which is a threat (Alshamaila, Papagiannidis and Li, 2013).
 Technological factor: This factor have impact on company as it is a technological trade.
It analyse the influence of technological trends and technologies. Some of the
technological factors are:
◦ Cybercrime
◦ Increased use of e-trade
◦ Mobile technology trend
 Environmental factors: Ecological concerns must be there with company for the
strategic decision making. It identifies concerns in relation with natural environment
regarding business. The main environmental factors of the firm are:
◦ Change in climate
◦ Declining oil reserves
◦ Increased focus on sustainability of business
 Legal factors: Legal system is having impact on business, this kind of dimension analyse
regulations and laws which impact business. Some of the legal factors are:
◦ Increase in complex laws regarding consumers
◦ Increase in complex laws regarding environment
◦ Improvement in laws of intellectual property
CONCLUSION
The given report explains the expansion of business in global context. This report is
based on the case of Toyota who is going to make their business expansion in Spain. From the
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study, it can be concluded that there are various factors which can be taken into consideration by
an organisation so that they will have an effective expansion. Company can analysis
determinants like workforce availability, living cost, income tax etc. so that they have plan
expansion accordingly. PESTEL analysis of an enterprise will also help them to know about the
opportunities and threats in external factor with the view point of expansion.
REFERENCES
Books and Journals
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Alshamaila, Y., Papagiannidis, S. and Li, F., 2013. Cloud computing adoption by SMEs in the
north east of England: A multi-perspective framework. Journal of Enterprise
Information Management. 26(3). pp .250-275.
Bachmann, R. and Inkpen, A.C., 2011. Understanding institutional-based trust building
processes in inter-organizational relationships. Organization Studies. 32(2). pp .281-
301.
Caligiuri, P. and Tarique, I., 2012. Dynamic cross-cultural competencies and global leadership
effectiveness. Journal of World Business. 47(4). pp .612-622.
Farndale, E., Scullion, H. and Sparrow, P., 2010. The role of the corporate HR function in global
talent management. Journal of world business. 45(2). pp .161-168.
Hill, C.W., Cronk, T. and Wickramasekera, R., 2013. Global business today. McGraw-Hill
Education (Australia).
Mellahi, K. and Collings, D.G., 2010. The barriers to effective global talent management: The
example of corporate elites in MNEs. Journal of World Business. 45(2). pp .143-149.
Nadkarni, S. and Herrmann, P.O.L., 2010. CEO personality, strategic flexibility, and firm
performance: The case of the Indian business process outsourcing industry. Academy of
Management Journal. 53(5). pp .1050-1073.
Nahavandi, A., 2016. The Art and Science of Leadership -Global Edition. Pearson.
Needle, D., 2010. Business in context: An introduction to business and its environment. Cengage
Learning EMEA.
Tarique, I. and Schuler, R.S., 2010. Global talent management: Literature review, integrative
framework, and suggestions for further research. Journal of world business. 45(2).
pp .122-133.
Wang, Y.M., Wang, Y.S. and Yang, Y.F., 2010. Understanding the determinants of RFID
adoption in the manufacturing industry. Technological forecasting and social change.
77(5). pp .803-815.
Online
Toyota PESTEL/PESTLE Analysis & Recommendations. 2017. [Online]. Available
through:<http://panmore.com/toyota-pestel-pestle-analysis-recommendations>.
[Accessed on 19th August 2017].
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